Sublease activity in October helped drive the Class A commercial market in Manhattan to its lowest vacancy rate in almost four years. The Class A vacancy rate for the borough was 8.2 percent, its lowest point since December 2001 and down from 9.0 percent in September, according to numbers from Colliers ABR.
Commercial sublease availability for Manhattan was at 6.8 million square feet by the end of October, the lowest point since only 6.4 million square feet were available in August 2001. The sublease changes aren’t that unusual, said Robert Sammons, research director at Colliers ABR, but in a tightening commercial market particularly in Midtown, where the overall October vacancy rate was 8.7 percent the changes can make a difference to the big picture.
“It’s that some of the spaces have reverted back to landlords,” Sammons said, explaining the sublease changes. “More recently, some sublease space has been removed from the market by the tenant.”
Directly leased space has declined, too, Sammons’ research showed, but sublease space disappeared from the market faster in October. Still, the 6.8 million feet remains higher than in the late 1990s and first couple of years of the current decade, when it averaged less than 1.5 million feet.
Major sublease changes recently, Sammons said, included JP Morgan Chase taking off the market 492,000 square feet at 245 Park Avenue and Advance Publications subleasing 120,000 feet at 1166 Avenue of the Americas; also, JP Morgan Chase has a controlling interest at 75 Wall Street, where 228,000 feet was taken off the market as part of a repositioning of the building as possibly residential.
Midtown
Market-leading Midtown’s overall 8.7 percent vacancy rate for October was a decrease from 9.4 percent in September, keeping with what has been a steady tightening of available space in the area, according the Colliers ABR. Midtown’s vacancy rate in October 2004 was nearly 11 percent.
Midtown’s October rate was also predictably below the overall Manhattan vacancy rate for the month of 9.4 percent, a decline from 9.9 percent in September. The biggest lease of October happened in 485 Lexington Avenue, where Citigroup gobbled yet more Midtown space this time, for 300,000 square feet. The only real bad news for Midtown in October came in asking rents. The average overall rent declined to $49.88 a foot from $50.50 in September.
Midtown South
Midtown South, dominated by Class B space and hailed by some commercial analysts as the city’s healthiest market, continued in October to see its overall vacancy rate decline. At 9 percent, it reached its lowest level since the 6.6 percent of March 2001, when the dot-com bust forced New Media firms to spill space onto the market. The average overall asking rent for Midtown South in October was $32.56 a square foot, up 27 cents from $32.29 the same month last year.
In October, sublease space in Midtown South dropped to its lowest amount this decade 1.4 million square feet, according to Colliers ABR, its lowest since the 1.1 million feet of December 2000.
Downtown
Throughout 2005, the predictable commercial lament for Downtown was that 7 World Trade Center, all 1.7 million glistening square feet of it, would open without any tenants, thereby weighing down the city’s already weakest commercial market. That lament appears valid: “If you include 7 World Trade,” Sammons said, “the vacancy rate for all of Manhattan Class A would be 8.9 percent instead of 8.2 percent.”
But Downtown’s fortunes in the next few months could change. As space disappears in Midtown and Midtown South, Downtown could see something of a leasing spree in 2006. It’s a common refrain as the year ends, though only time will tell if it’s true.
“Large blocks of space are dwindling in Midtown,” said Larry Silverstein, 7 World Trade’s landlord. “Tenants will need large blocks of space with the latest in office technology.”
Downtown as of October had 19 blocks of space greater than 100,000 square feet and costing under $55 a foot; Midtown and Midtown South had 12 and 10 such spaces, respectively, according to a report by CB Richard Ellis. The overall vacancy rate for Downtown in October was 11.8 percent, a slight decrease from 12 percent in September. The average asking rent for Downtown was $31.36 in October, up 9 cents from the month before.
